Farmer Bros. Co. (NASDAQ: FARM) (the "Company") today reported
financial results for its third fiscal quarter ended March 31,
2020. The Company also provided an update on its response to the
COVID-19 pandemic.
Third Quarter Fiscal 2020 Highlights:
- Volume of green coffee processed and sold decreased by 2.2
million to 25.7 million pounds, a 7.9% decrease over the prior year
period partially due to the impact of COVID-19 pandemic discussed
below;
- Green coffee pounds processed and sold through our DSD network
were 8.4 million, or 32.5% of total green coffee pounds processed
and sold
- Direct ship customers represented 17.1 million, or 66.4%, of
total green coffee pounds processed and sold
- Distributor customers represented 0.3 million pounds, or 1.0%,
of total green coffee pounds processed and sold
- Net sales were $129.1 million, a decrease of $17.5 million, or
12.0%, from the prior year period;
- Gross margin increased to 29.4% from 27.2% in the prior year
period;
- Operating expenses as percentage of sales, inclusive of a $42.0
million intangible asset impairment chargeincreased to 64.4% from
31.4% in the prior year period;
- Net loss was $39.8 million compared to net loss of $51.7
million in the prior year period; and
- Adjusted EBITDA was $6.6 million compared to $4.5 million in
the prior year period.*
(*Adjusted EBITDA, a non-GAAP financial measure, is reconciled
to its corresponding GAAP measure at the end of this press
release.)
“Farmer Brothers has moved rapidly to address
unprecedented challenges associated with the COVID-19 pandemic and
I am proud of the way we have adapted our operations to new ways of
working,” said Deverl Maserang, President and CEO. “Our
response to the COVID-19 crisis has been focused on three
priorities including: protecting the health and safety of our
employees and customers; preserving liquidity and supporting the
long-term sustainability of our business; and pivoting our business
to accelerate many of our strategies including our e-commerce
initiatives, expanding our roastery direct services, and enhancing
pop-up and additional retail sales opportunities. I am encouraged
by the significant progress we saw through January, February and
early March across both DSD and Direct Ship. Prior to the COVID-19
pandemic, we were on track to exceed our expectations and deliver
adjusted EBITDA in excess of prior quarters, demonstrating that our
strategies are working. We continue to believe our turnaround
strategy provides the foundation we need to position Farmer
Brothers to support our customers through this crisis and
beyond.”
COVID-19 Business Update:
The COVID-19 pandemic and the related
shelter-in-place orders, as well as changes in recent consumer
behavior, have had an adverse impact on certain of the Company's
DSD customers, particularly restaurants, hotels, casinos and
coffeehouses. Many of these customers have been forced to close or
curtail operations, and are purchasing at reduced volumes if at
all. As a result, in the last two weeks of March and into April,
sales from the Company’s DSD customers declined between 65% to 70%
from the pre COVID-19 pandemic average sales. The Company is unable
to predict the rate at which these customers will resume operations
and purchases as shelter-in-place restrictions are lifted. We do
not expect to see a meaningful improvement in our operating results
until federal, state and local government authorities ease travel
bans and restrictions, quarantines, shelter-in-place orders, and
shutdowns.
Farmer Brothers continues to take the appropriate steps to
enhance its operational and financial flexibility and ensure its
long-term sustainability. To date, the Company has taken the
following actions in response to the COVID-19 pandemic:
- Temporarily decreased compensation to executive leadership,
members of the Board of Directors, and corporate team members and
all exempt employees (except route sales representatives);
- Reduced headcount and furloughed employees;
- Reduced spending, including, among other items:
- Instituting a moratorium on all travel;
- Reducing plant production costs at two of our plants;
- Reducing capital expenditures;
- Implementing cost controls throughout our coffee brewing
equipment program service network; and
- Reducing our DSD supply chain network costs.
- Commenced negotiations with landlords on rent, operating
expenses and leases;
- Drew down $42.0 million in April 2020 on its $125.0 million
revolving credit facility to increase the Company’s cash position
and preserve financial flexibility; and
- Prepared to apply for appropriate relief under the Main Street
Lending program of the CARES Act as we obtain additional
guidance.
We expect these actions will improve our cost structure to
mitigate the impact of the COVID-19 pandemic on our operating
results and liquidity, however there are no assurances at this
time. As a result, we are exploring several different opportunities
and access to various capital resources to provide additional
near-term liquidity.
At this time it is not possible to predict the duration and
scope of the COVID-19 pandemic or its short and longer-term impact
on the demand for our products and services.
Third Quarter Fiscal 2020 Results:
Selected Financial Data
The selected financial data presented below
under the captions “Income statement data,” “Operating data” and
“Other data” summarizes certain performance measures for the three
and nine months ended March 31, 2020 and 2019 (unaudited).
|
|
Three Months Ended March 31, |
|
Nine Months Ended March 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
Income statement data: |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
129,139 |
|
|
$ |
146,679 |
|
|
$ |
420,237 |
|
|
$ |
453,892 |
|
Gross margin |
|
29.4 |
% |
|
27.2 |
% |
|
29.2 |
% |
|
31.1 |
% |
Loss from operations |
|
$ |
(45,169 |
) |
|
$ |
(6,102 |
) |
|
$ |
(29,407 |
) |
|
$ |
(7,678 |
) |
Net loss |
|
$ |
(39,777 |
) |
|
$ |
(51,749 |
) |
|
$ |
(27,369 |
) |
|
(64,835 |
) |
Net loss available to common
stockholders per common share—diluted |
|
$ |
(2.32 |
) |
|
$ |
(3.05 |
) |
|
$ |
(1.62 |
) |
|
$ |
(3.84 |
) |
|
|
|
|
|
|
|
|
|
Operating data: |
|
|
|
|
|
|
|
|
Coffee pounds |
|
25,678 |
|
|
27,873 |
|
|
80,995 |
|
|
80,719 |
|
EBITDA(1) |
|
$ |
(32,272 |
) |
|
$ |
639 |
|
|
$ |
(1,980 |
) |
|
$ |
2,109 |
|
EBITDA Margin(1) |
|
(25.0 |
)% |
|
0.4 |
% |
|
(0.5 |
)% |
|
0.5 |
% |
Adjusted EBITDA(1) |
|
$ |
6,563 |
|
|
$ |
4,535 |
|
|
$ |
18,028 |
|
|
$ |
27,945 |
|
Adjusted EBITDA Margin(1) |
|
5.1 |
% |
|
3.1 |
% |
|
4.3 |
% |
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
Other data: |
|
|
|
|
|
|
|
|
Capital expenditures related
to maintenance |
|
$ |
3,163 |
|
|
$ |
4,434 |
|
|
$ |
10,622 |
|
|
$ |
17,001 |
|
Total capital
expenditures |
|
$ |
4,107 |
|
|
$ |
7,273 |
|
|
$ |
13,114 |
|
|
$ |
30,393 |
|
Depreciation and amortization
expense |
|
$ |
7,333 |
|
|
$ |
7,600 |
|
|
$ |
22,544 |
|
|
$ |
23,230 |
|
(1) EBITDA, EBITDA Margin, Adjusted EBITDA and
Adjusted EBITDA Margin are non-GAAP financial measures; a
reconciliation of these non-GAAP measures to their corresponding
GAAP measures is included at the end of this press release.
Net sales in the third quarter of fiscal 2020
were $129.1 million, a decrease of $17.5 million, or 12.0%, from
the prior year period. The decrease in net sales was driven
primarily by lower sales of coffee, beverage and allied products
sold through our DSD network due to the COVID-19 pandemic, as well
as the sale of our office coffee business in July 2019 and net
customer attrition. The impact of the COVID-19 pandemic on DSD
revenues in the last two weeks of March 2020 was a decline of
approximately 65% to 70% compared to the pre-COVID sales run rates
as our customer base had either limited operations, or had closed
their doors in compliance with the federal, states and local
governments’ restrictions on social distancing. The largest DSD
revenue declines were from restaurants, hotels and casino channels,
while demand from healthcare and C-stores channels were impacted
less. Our direct ship sales declined compared to the prior year
period due to lower coffee volume and the impact of coffee prices
for our cost plus customer, partially offset by favorable customer
mix shift.
Gross profit in the third quarter of fiscal 2020
was $37.9 million, a decrease of $2.0 million, or 4.9% from the
prior year period and gross margin increased to 29.4% from 27.2%.
The increase in gross margin was primarily driven by lower reserves
for slow moving inventories, lower freight costs, lower coffee
brewing equipment costs and improved production variances.
Operating expenses in the third quarter of
fiscal 2020 increased $37.1 million, or 80.7%, to $83.1 million,
from $46.0 million, and as a percentage of net sales increased to
64.4% compared to 31.4% of net sales, in the prior year period. The
increase in operating expenses was primarily due to impairments of
goodwill and intangible assets of $42.0 million, partially offset
by a $2.5 million decrease in selling expenses and a $2.5 million
decrease in general and administrative expenses. Impairment of
goodwill and intangible assets was primarily associated with our
annual impairment test as of January 31, 2020, adjusted further by
the impact of the COVID-19 pandemic that had a negative impact on
the fair value of our assets. The decrease in selling expenses was
primarily driven by efficiencies realized from DSD route
optimization, lower DSD sales commissions and travel expenses. The
decrease in general and administrative expenses was associated
primarily with reductions in third party costs, lower headcount,
the absence of Boyd Coffee integration costs and one-time credit
for employee incentive cost due to the reversal of the fiscal 2020
management incentive compensation accrual, partially offset by the
COVID-19 pandemic related severance costs.
Interest expense in the third quarter of fiscal
2020 decreased $0.5 million to $2.5 million as compared to $3.0
million in the prior year period principally due to lower pension
interest expense and less borrowings on our credit facility.
In March 2020, we announced the termination of
our postretirement medical benefit plan, effective January 1, 2021.
The announcement triggered a re-measurement, and resulted in
curtailment gains of $5.8 million in the three months ended
March 31, 2020.
Other, net in the third quarter of fiscal 2020
increased by $0.6 million to $1.1 million in the quarter compared
to $0.5 million in the prior year period primarily due to lower
mark-to-market net losses on coffee-related derivative instruments
not designated as accounting hedges.
Income tax benefit was $1.0 million in the third
quarter of fiscal 2020 as compared to income tax expense of $43.2
million in the prior year period. The tax benefit is primarily due
to the previously recorded valuation allowance and change in our
estimated deferred tax liability during the three months ended
March 31, 2020 as compared to the prior year period.
As a result of the foregoing factors, net loss
was $39.8 million in the third quarter of fiscal 2020 as compared
to net loss of $51.7 million in the prior year period. Net loss
available to common stockholders was $39.9 million, or $2.32 per
common share available to common stockholders-diluted, in the third
quarter of fiscal 2020, compared to net loss available to common
stockholders of $51.9 million, or $3.05 per common share available
to common stockholders-diluted, in the prior year period.
Non-GAAP Financial
Measures:
EBITDA, EBITDA Margin, Adjusted EBITDA and
Adjusted EBITDA Margin are non-GAAP (U.S. generally accepted
accounting principles) financial measures within the meaning of the
rules of the Securities and Exchange Commission (“SEC”). See the
Non-GAAP Financial Measures section on why the Company believes
these supplemental measures are useful, reconciliations to the most
directly comparable GAAP measure, and the limitations on the use of
these supplemental measures.
Adjusted EBITDA was $6.6 million in the third
quarter of fiscal 2020, as compared to Adjusted EBITDA of $4.5
million in the prior year period, and Adjusted EBITDA Margin was
5.1% in the third quarter of fiscal 2019, as compared to Adjusted
EBITDA Margin of 3.1% in the prior year period.
About Farmer Bros. Co.
Founded in 1912, Farmer Bros. Co. is a national
coffee roaster, wholesaler and distributor of coffee, tea and
culinary products. The Company’s product lines include organic,
Direct Trade and sustainably-produced coffee. With a robust line of
coffee, hot and iced teas, cappuccino mixes, spices, and
baking/biscuit mixes, the Company delivers extensive beverage
planning services and culinary products to its U.S. based
customers. The Company serves a wide variety of customers, from
small independent restaurants and foodservice operators to large
institutional buyers like restaurant and convenience store chains,
hotels, casinos, healthcare facilities, and gourmet coffee houses,
as well as grocery chains with private brand coffee and consumer
branded coffee and tea products, and foodservice distributors.
Headquartered in Northlake, Texas, Farmer Bros.
Co. generated net sales of $595.9 million in fiscal 2019. The
Company’s primary brands include Farmer Brothers®, Artisan
Collection by Farmer Brothers™, Superior®, Metropolitan™, China
Mist® and Boyds®.
Investor Conference Call
Deverl Maserang, Chief Executive Officer, and
Scott Drake, Chief Financial Officer, will host an audio-only
investor conference call today, May 7, 2020, at 5:00 p.m.
Eastern time (4:00 p.m. Central time) to review the Company’s
financial results for the third fiscal quarter ended March 31,
2020. The Company’s earnings press release will be available on the
Company’s website at www.farmerbros.com under “Investor
Relations.”
The call will be open to all interested
investors through a live audio web broadcast via the Internet at
https://edge.media-server.com/mmc/p/8i2ympzm and at the
Company’s website www.farmerbros.com under “Investor
Relations.” The call also will be available to investors and
analysts by dialing Toll Free: 1-(844) 423-9890 or international:
1-(716) 247-5805. The passcode/ID is 7995014.
The audio-only webcast will be archived for at
least 30 days on the Investor Relations section of the Farmer Bros.
Co. website, and will be available approximately two hours after
the end of the live webcast.
Forward-Looking Statements
Certain statements contained in this press
release are not based on historical fact and are forward-looking
statements within the meaning of federal securities laws and
regulations. These statements are based on management's current
expectations, assumptions, estimates and observations of future
events and include any statements that do not directly relate to
any historical or current fact. These forward-looking statements
can be identified by the use of words like “anticipates,”
“estimates,” “projects,” “expects,” “plans,” “believes,” “intends,”
“will,” “could,” “assumes” and other words of similar meaning.
Owing to the uncertainties inherent in forward-looking statements,
actual results could differ materially from those set forth in
forward-looking statements. The Company intends these
forward-looking statements to speak only at the time of this press
release and does not undertake to update or revise these statements
as more information becomes available except as required under
federal securities laws and the rules and regulations of the
Securities and Exchange Commission (“SEC”).Factors that could cause
actual results to differ materially from those in forward-looking
statements include, but are not limited to, duration of the
COVID-19 pandemic’s disruption to the Company’s business and
customers, levels of consumer confidence in national and local
economic business conditions, the duration and magnitude of the
pandemic’s impact on unemployment rates, the success of the
Company’s strategy to recover from the effects of the pandemic, the
success of the Company's turnaround strategy, the five key
initiatives, the impact of capital improvement projects, the
adequacy and availability of capital resources to fund the
Company’s existing and planned business operations and the
Company’s capital expenditure requirements, the relative
effectiveness of compensation-based employee incentives in causing
improvements in Company performance, the capacity to meet the
demands of our large national account customers, the extent of
execution of plans for the growth of Company business and
achievement of financial metrics related to those plans, the
success of the Company to retain and/or attract qualified
employees, the success of the Company’s adaptation to technology
and new commerce channels, the effect of the capital markets as
well as other external factors on stockholder value, fluctuations
in availability and cost of green coffee, competition,
organizational changes, the effectiveness of our hedging strategies
in reducing price and interest rate risk, changes in consumer
preferences, our ability to provide sustainability in ways that do
not materially impair profitability, changes in the strength of the
economy, business conditions in the coffee industry and food
industry in general, our continued success in attracting new
customers, variances from budgeted sales mix and growth rates,
weather and special or unusual events, as well as other risks
described in this report and other factors described from time to
time in our filings with the SEC. The results of operations for the
three and nine months ended March 31, 2020 are not necessarily
indicative of the results that may be expected for any future
period.
FARMER
BROS. CO.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)(In thousands, except share
and per share data)
|
Three Months Ended March 31, |
|
Nine Months Ended March 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net sales |
$ |
129,139 |
|
|
$ |
146,679 |
|
|
$ |
420,237 |
|
|
$ |
453,892 |
|
Cost of goods sold |
91,190 |
|
|
106,779 |
|
|
297,662 |
|
|
312,513 |
|
Gross profit |
37,949 |
|
|
39,900 |
|
|
122,575 |
|
|
141,379 |
|
Selling expenses |
31,968 |
|
|
34,422 |
|
|
100,488 |
|
|
111,323 |
|
General and administrative
expenses |
8,833 |
|
|
11,306 |
|
|
32,839 |
|
|
32,063 |
|
Restructuring and other
transition expenses |
— |
|
|
26 |
|
|
— |
|
|
4,700 |
|
Net gains from sales of
assets |
287 |
|
|
248 |
|
|
(23,375 |
) |
|
971 |
|
Impairment of goodwill and
intangible assets |
42,030 |
|
|
— |
|
|
42,030 |
|
|
— |
|
Operating expenses |
83,118 |
|
|
46,002 |
|
|
151,982 |
|
|
149,057 |
|
Loss from operations |
(45,169 |
) |
|
(6,102 |
) |
|
(29,407 |
) |
|
(7,678 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
Interest expense |
(2,478 |
) |
|
(2,981 |
) |
|
(7,885 |
) |
|
(9,165 |
) |
Postretirement benefits curtailment and pension settlement
charge |
5,760 |
|
|
— |
|
|
5,760 |
|
|
(10,948 |
) |
Other, net . |
1,076 |
|
|
495 |
|
|
2,941 |
|
|
2,105 |
|
Total other expense |
4,358 |
|
|
(2,486 |
) |
|
816 |
|
|
(18,008 |
) |
Loss before taxes |
(40,811 |
) |
|
(8,588 |
) |
|
(28,591 |
) |
|
(25,686 |
) |
Income tax (benefit)
expense |
(1,034 |
) |
|
43,161 |
|
|
(1,222 |
) |
|
39,149 |
|
Net loss |
$ |
(39,777 |
) |
|
$ |
(51,749 |
) |
|
$ |
(27,369 |
) |
|
$ |
(64,835 |
) |
Less: Cumulative preferred
dividends, undeclared and unpaid |
139 |
|
|
134 |
|
|
414 |
|
|
400 |
|
Net loss available to common
stockholders |
$ |
(39,916 |
) |
|
$ |
(51,883 |
) |
|
$ |
(27,783 |
) |
|
$ |
(65,235 |
) |
Net loss available to common
stockholders per common share—basic |
$ |
(2.32 |
) |
|
$ |
(3.05 |
) |
|
$ |
(1.62 |
) |
|
$ |
(3.84 |
) |
Net loss available to common
stockholders per common share—diluted |
$ |
(2.32 |
) |
|
$ |
(3.05 |
) |
|
$ |
(1.62 |
) |
|
$ |
(3.84 |
) |
Weighted average common shares
outstanding—basic |
17,230,879 |
|
|
17,003,206 |
|
|
17,161,477 |
|
|
16,982,247 |
|
Weighted average common shares
outstanding—diluted |
17,230,879 |
|
|
17,003,206 |
|
|
17,161,477 |
|
|
16,982,247 |
|
FARMER
BROS. CO.CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)(In thousands, except share and
per share data)
|
March 31, 2020 |
|
June 30, 2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
26,389 |
|
|
$ |
6,983 |
|
Accounts receivable, net |
50,889 |
|
|
55,155 |
|
Inventories |
85,934 |
|
|
87,910 |
|
Income tax receivable |
1,020 |
|
|
1,191 |
|
Short-term derivative assets |
2,833 |
|
|
1,865 |
|
Prepaid expenses |
6,230 |
|
|
6,804 |
|
Total current assets |
173,295 |
|
|
159,908 |
|
Property, plant and equipment,
net |
169,361 |
|
|
189,458 |
|
Goodwill |
— |
|
|
36,224 |
|
Intangible assets, net |
21,264 |
|
|
28,878 |
|
Other assets |
9,144 |
|
|
9,468 |
|
Long-term derivatives
assets |
470 |
|
|
674 |
|
Right-of-use operating lease
assets |
21,789 |
|
|
— |
|
Total assets |
$ |
395,323 |
|
|
$ |
424,610 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
59,577 |
|
|
72,771 |
|
Accrued payroll expenses |
14,329 |
|
|
14,518 |
|
Operating leases liabilities - current |
6,031 |
|
|
— |
|
Short-term derivative liabilities |
1,401 |
|
|
1,474 |
|
Other current liabilities |
6,476 |
|
|
7,309 |
|
Total current liabilities |
87,814 |
|
|
96,072 |
|
Long-term borrowings under
revolving credit facility |
80,000 |
|
|
92,000 |
|
Accrued pension
liabilities |
45,145 |
|
|
47,216 |
|
Accrued postretirement
benefits |
9,065 |
|
|
23,024 |
|
Accrued workers’ compensation
liabilities |
5,000 |
|
|
4,747 |
|
Operating lease liabilities -
noncurrent |
16,010 |
|
|
— |
|
Other long-term
liabilities |
4,553 |
|
|
4,057 |
|
Total liabilities |
$ |
247,587 |
|
|
$ |
267,116 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock, $1.00 par value, 500,000 shares authorized; Series
A Convertible Participating Cumulative Perpetual Preferred Stock,
21,000 shares authorized; 14,700 shares issued and outstanding as
of March 31, 2020 and June 30, 2019; liquidation preference of
$16,038 and $15,624 as of March 31, 2020 and June 30, 2019,
respectively |
15 |
|
|
15 |
|
Common stock, $1.00 par value, 25,000,000 shares authorized;
17,231,473 and 17,042,132 shares issued and outstanding as of March
31, 2020 and June 30, 2019, respectively |
17,234 |
|
|
17,042 |
|
Additional paid-in capital |
61,027 |
|
|
57,912 |
|
Retained earnings |
118,394 |
|
|
146,177 |
|
Accumulated other comprehensive loss |
(48,934 |
) |
|
(63,652 |
) |
Total stockholders’ equity |
$ |
147,736 |
|
|
$ |
157,494 |
|
Total liabilities and stockholders’ equity |
$ |
395,323 |
|
|
$ |
424,610 |
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) |
(In thousands) |
|
Nine Months Ended March 31, |
|
2020 |
|
2019 |
Cash flows from operating
activities: |
|
|
|
Net loss |
$ |
(27,369 |
) |
|
$ |
(64,835 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
Depreciation and amortization |
22,544 |
|
|
23,230 |
|
Restructuring and other transition expenses, net of
payments |
— |
|
|
1,886 |
|
Deferred income taxes |
— |
|
|
40,078 |
|
Impairment of goodwill and intangible assets |
42,030 |
|
|
— |
|
Postretirement benefits curtailment and pension settlement
charge |
(5,760 |
) |
|
10,948 |
|
Net gains from sales of assets |
(23,375 |
) |
|
971 |
|
Net losses on derivative instruments |
9,830 |
|
|
9,228 |
|
Other adjustments |
3,698 |
|
|
4,981 |
|
Change in operating assets and liabilities: |
|
|
|
Accounts receivable |
3,745 |
|
|
(7,651 |
) |
Inventories |
1,004 |
|
|
3,937 |
|
Derivative assets/liabilities, net |
(2,472 |
) |
|
(13,229 |
) |
Other assets |
1,510 |
|
|
180 |
|
Accounts payable |
(13,194 |
) |
|
8,466 |
|
Accrued expenses and other liabilities |
(4,126 |
) |
|
(10,690 |
) |
Net cash provided by operating
activities |
$ |
8,065 |
|
|
$ |
7,500 |
|
Cash flows from investing
activities: |
|
|
|
Purchases of property, plant and equipment |
(13,114 |
) |
|
(30,393 |
) |
Proceeds from sales of property, plant and equipment |
36,733 |
|
|
143 |
|
Net cash provided (used) in
investing activities |
$ |
23,619 |
|
|
$ |
(30,250 |
) |
Cash flows from financing
activities: |
|
|
|
Proceeds from revolving credit facility |
$ |
48,000 |
|
|
$ |
50,642 |
|
Repayments on revolving credit facility |
(60,000 |
) |
|
(17,417 |
) |
Payments of finance lease obligations |
(40 |
) |
|
(185 |
) |
Payment of financing costs |
(367 |
) |
|
(1,041 |
) |
Proceeds from stock option exercises |
129 |
|
|
507 |
|
Net cash (used) provided by
financing activities |
$ |
(12,278 |
) |
|
$ |
32,506 |
|
Net increase in cash and cash
equivalents |
$ |
19,406 |
|
|
$ |
9,756 |
|
Cash and cash equivalents at
beginning of period |
6,983 |
|
|
2,438 |
|
Cash and cash equivalents at
end of period |
$ |
26,389 |
|
|
$ |
12,194 |
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(continued) |
(In thousands) |
|
Nine Months Ended March 31, |
|
2020 |
|
2019 |
Supplemental disclosure of
non-cash investing and financing activities: |
|
|
|
Non-cash additions to property, plant and equipment |
$ |
1,130 |
|
|
$ |
739 |
|
Non-cash portion of earnout receivable recognized—spice
assets sale |
$ |
— |
|
|
$ |
592 |
|
Non-cash portion of earnout payable recognized—West Coast
Coffee acquisition |
$ |
— |
|
|
$ |
1,000 |
|
Non-cash issuance of 401-K common stock |
$ |
163 |
|
|
$ |
— |
|
Cumulative preferred dividends, undeclared and unpaid |
$ |
414 |
|
|
$ |
400 |
|
Non-GAAP Financial Measures
In addition to net (loss) income determined in
accordance with U.S. generally accepted accounting principles
(“GAAP”), we use the following non-GAAP financial measures in
assessing our operating performance:
“EBITDA” is defined as net (loss) income
excluding the impact of:
- income taxes;
- interest expense; and
- depreciation and amortization expense.
“EBITDA Margin” is defined as EBITDA expressed
as a percentage of net sales.
“Adjusted EBITDA” is defined as net (loss)
income excluding the impact of:
- income taxes;
- interest expense;
- (loss) income from short-term investments;
- depreciation and amortization expense;
- ESOP and share-based compensation expense;
- non-cash impairment losses;
- non-cash pension withdrawal expense;
- restructuring and other transition expenses;
- severance costs;
- proxy related expenses;
- non-recurring costs associated with the COVID-19 pandemic;
- net gains and losses from sales of assets;
- non-cash pension and postretirement benefits; and
- acquisition and integration costs.
“Adjusted EBITDA Margin” is defined as Adjusted
EBITDA expressed as a percentage of net sales.
Restructuring and other transition expenses are
expenses that are directly attributable to (i) employee retention
and separation benefits, pension withdrawal expense,
facility-related costs and other related costs such as travel,
legal, consulting and other professional services; and (ii)
severance, prorated bonuses for bonus eligible employees,
contractual termination payments and outplacement services, and
other related costs, including legal, recruiting, consulting, other
professional services, and travel.
For purposes of calculating EBITDA and EBITDA
Margin and Adjusted EBITDA and Adjusted EBITDA Margin, we have
excluded the impact of interest expense resulting from the adoption
of ASU 2017-07, non-cash pretax pension and postretirement benefits
resulting from the amendment and termination of the Farmer Bros.
pension and postretirement benefits plans and severance because
these items are not reflective of our ongoing operating
results.
We believe these non-GAAP financial measures
provide a useful measure of the Company’s operating results, a
meaningful comparison with historical results and with the results
of other companies, and insight into the Company’s ongoing
operating performance. Further, management utilizes these measures,
in addition to GAAP measures, when evaluating and comparing the
Company’s operating performance against internal financial
forecasts and budgets.
We believe that EBITDA facilitates
operating performance comparisons from period to period by
isolating the effects of certain items that vary from period to
period without any correlation to core operating performance or
that vary widely among similar companies. These potential
differences may be caused by variations in capital structures
(affecting interest expense), tax positions (such as the impact on
periods or companies of changes in effective tax rates or net
operating losses) and the age and book depreciation of facilities
and equipment (affecting relative depreciation expense). We also
present EBITDA and EBITDA Margin because (i) we believe
that these measures are frequently used by securities analysts,
investors and other interested parties to evaluate companies in our
industry, (ii) we believe that investors will find these measures
useful in assessing our ability to service or incur indebtedness,
and (iii) we use these measures internally as benchmarks to
compare our performance to that of our competitors.
EBITDA, EBITDA Margin, Adjusted EBITDA and
Adjusted EBITDA Margin, as defined by us, may not be comparable to
similarly titled measures reported by other companies. We do not
intend for non-GAAP financial measures to be considered in
isolation or as a substitute for other measures prepared in
accordance with GAAP.
Set forth below is a reconciliation of reported
net loss to EBITDA (unaudited):
|
|
Three Months Ended March 31, |
|
Nine Months Ended March 31, |
(In
thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net loss, as reported |
|
$ |
(39,777 |
) |
|
$ |
(51,749 |
) |
|
$ |
(27,369 |
) |
|
$ |
(64,835 |
) |
Income tax (benefit)
expense |
|
(1,034 |
) |
|
43,161 |
|
|
(1,222 |
) |
|
39,149 |
|
Interest expense (1) |
|
1,206 |
|
|
1,627 |
|
|
4,067 |
|
|
4,565 |
|
Depreciation and amortization
expense |
|
7,333 |
|
|
7,600 |
|
|
22,544 |
|
|
23,230 |
|
EBITDA |
|
$ |
(32,272 |
) |
|
$ |
639 |
|
|
$ |
(1,980 |
) |
|
$ |
2,109 |
|
EBITDA Margin |
|
(25.0 |
)% |
|
0.4 |
% |
|
(0.5 |
)% |
|
0.5 |
% |
____________
(1) Excludes interest expense related to pension
plans and postretirement benefits.
Set forth below is a reconciliation of reported
net loss to Adjusted EBITDA (unaudited):
|
|
Three Months Ended March 31, |
|
Nine Months Ended March 31, |
(In
thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net loss, as reported |
|
$ |
(39,777 |
) |
|
$ |
(51,749 |
) |
|
$ |
(27,369 |
) |
|
$ |
(64,835 |
) |
Income tax (benefit)
expense |
|
(1,034 |
) |
|
43,161 |
|
|
(1,222 |
) |
|
39,149 |
|
Interest expense(1) |
|
1,206 |
|
|
1,627 |
|
|
4,067 |
|
|
4,565 |
|
Depreciation and amortization
expense |
|
7,333 |
|
|
7,600 |
|
|
22,544 |
|
|
23,230 |
|
ESOP and share-based
compensation expense |
|
1,418 |
|
|
1,238 |
|
|
3,197 |
|
|
3,095 |
|
Restructuring and other
transition expenses(2) |
|
— |
|
|
26 |
|
|
— |
|
|
4,700 |
|
Net losses (gains) from sales
of other assets |
|
287 |
|
|
248 |
|
|
(23,375 |
) |
|
971 |
|
Impairment of goodwill and
intangible assets |
|
42,030 |
|
|
— |
|
|
42,030 |
|
|
— |
|
Non-recurring costs associated
with the COVID-19 pandemic |
|
129 |
|
|
— |
|
|
129 |
|
|
— |
|
Proxy contest-related
expenses |
|
204 |
|
|
— |
|
|
463 |
|
|
— |
|
Acquisition and integration
costs |
|
— |
|
|
2,384 |
|
|
— |
|
|
6,122 |
|
Postretirement benefits
curtailment and pension settlement charge |
|
(5,760 |
) |
|
— |
|
|
(5,760 |
) |
|
10,948 |
|
Severance |
|
527 |
|
|
— |
|
|
3,324 |
|
|
— |
|
Adjusted EBITDA |
|
$ |
6,563 |
|
|
$ |
4,535 |
|
|
$ |
18,028 |
|
|
$ |
27,945 |
|
Adjusted EBITDA Margin |
|
5.1 |
% |
|
3.1 |
% |
|
4.3 |
% |
|
6.2 |
% |
____________
(1) Excludes interest expense related to
pension plans and postretirement benefits.(2) The nine months ended
March 31, 2019, includes $3.4 million, including interest,
assessed by the WC Pension Trust representing the Company’s share
of the Western Conference of Teamsters Pension Plan ("WCTPP")
unfunded benefits due to the Company’s partial withdrawal from the
WCTPP as a result of employment actions taken by the Company in
2016 in connection with the Corporate Relocation Plan.
Contact:
Joele Frank, Wilkinson Brimmer
Katcher
Leigh
Parrish 212-355-4449
Farmer Brothers (NASDAQ:FARM)
Historical Stock Chart
From Aug 2024 to Sep 2024
Farmer Brothers (NASDAQ:FARM)
Historical Stock Chart
From Sep 2023 to Sep 2024